Several countries are raising interest rates to combat inflation, noting that this takes money out of economies and could lead to massive unemployment, and despite the pain this policy move causes, it is not well understood.
[insertAds]This is written by John Letzing, digital editor in Strategic Intelligence for the World Economic Forum, and Minjie Song, who specializes in data and content visualizations for the Strategic Intelligence Division of the World Economic Forum.
This was an assessment of a member of Congress after they protested the farmers’ descent into Washington, D.C. in 1979, throwing live goats over the White House fence, causing millions of dollars in damage to their tractors, and forcing them into an embarrassing confrontation with central bankers over high interest rates that have made it difficult Get much needed loans.
[insertAds]By 1981 the country’s benchmark interest rate had been raised to nearly 20%, which not only prevented the economy from hampering, but halted its movement completely, and borrowing money to buy a home could incur 18.5% at that point, requiring a payment of approximately one-fifth of what was Payable regularly to lenders for the privilege of doing business with them and making home ownership seem impossible.
This was an assessment of a member of Congress after they protested the farmers’ descent into Washington, D.C. in 1979, throwing live goats over the White House fence, causing millions of dollars in damage to their tractors, and forcing them into an embarrassing confrontation with central bankers over high interest rates that have made it difficult Get much needed loans.
By 1981 the country’s benchmark interest rate had been raised to nearly 20%, which not only prevented the economy from hampering, but halted its movement completely, and borrowing money to buy a home could incur 18.5% at that point, requiring a payment of approximately one-fifth of what was Payable regularly to lenders for the privilege of doing business with them and making home ownership seem impossible.
[insertAds]Soft Landing
If central bankers are putting too much pressure on the life of the economy it may be difficult to revive it, and that could lead to rampant unemployment, so they aim for a “soft landing” that curbs inflation without causing a recession.
In the 1980s, Israel was able to use interest rate hikes to reduce rampant inflation to almost nothing as unemployment rose only slightly, and other efforts were less successful, according to a recent analysis, and the US Federal Reserve achieved a weak “real” decline and one of nine interest rate increases since 1961.
There are also concerns about the lack of subtlety involved in policy action, and it has been noted that Russia is responsible for raising food and fuel prices. Although raising prices would do little to target the Russian war effort, it would target the purchasing power of the average person.
Despite the endless headlines about interest rates and inflation, the general understanding of what is at stake may be less than perfect. One survey found that many Americans were “concerned” about the idea of increasing rates, but a quarter of respondents were from Generation Z. They were simply “confused”.
[insertAds]Negative Effects
People who were unable to take advantage of low prices to buy a home may now be at a disadvantage to amass a fortune, and those with large debts may be stressed.
An analysis conducted in Australia last year indicated that high household debt levels meant the benchmark interest rate could not rise above 2% without a serious threat to consumer spending, and the ceiling was raised to 0.85% earlier this June. .
In the US, higher interest rates are expected to hamper efforts to close racial unemployment gaps (the rate of black Americans is about 6% compared to an overall rate of 3.6%), and in Denmark, higher rates are likely to disproportionately affect women entrepreneurs.
However, the alternative may be worse, as spiraling inflation could lead to unrest, a protest against the cost of living in Brussels earlier this week attracted 70,000 people, and central bankers need to prove that someone is in control.